Topeka Years of under-funding Kansas’ public pension system need to be corrected soon, officials say.
“Current benefits are safe for a period of time, but we do have a significant long-term funding shortfall,” said Glenn Deck, executive director of the Kansas Public Employees Retirement System.
KPERS projects a $7.7 billion gap between long-term revenues and commitments for paying pensions.
Nearly all state, school district, county and city employees in Kansas are part of KPERS. Some 260,000 Kansans are paying into the system or drawing out retirement benefits. KPERS pays out more than $1 billion in benefits per year.
But the state has not been contributing at the rate it needs to keep KPERS properly financed.
Combine that with devastating investment losses in the stock market during the recession, and KPERS needs help.
“That’s sort of the peanut,” said Julian Efird, of the Kansas Legislative Research Department. “There have been systematic under-contributions and there have been periods of significant market losses,” he told members of the House Pensions and Benefits Committee last week.
Deck is quick to note there is no immediate problem in paying out benefits, but adds, “The longer we keep pushing it off, the price gets bigger.”
State Rep. Mitch Holmes, R-St. John, and chairman of the Pensions and Benefits Committee, plans on holding several informational hearings on KPERS issues during the current legislative session. Whether that will result in legislation to try to fix KPERS is uncertain at this time.
“I’m very encouraged by the enthusiasm of the members” in discussing KPERS issues, he said.
Any fix will cost money, which is something that the state is lacking.
In his departing comments, former Gov. Mark Parkinson lamented that he was unable to address problems with KPERS because of the state’s severe budget crunch.
“Hundreds of thousands of Kansans that serve our state will depend on KPERS to secure their retirement, and it is not funded properly. This is true for a variety of reasons, and they are all fixable,” Parkinson said.
“Unfortunately, part of the fix will require the state to provide additional funding. Another part of the fix will require people in the system to give a little more and accept a little less,” he said.
In his State of the State address last week, new Gov. Sam Brownback urged the Legislature “to work to ensure the integrity and soundness of the system for decades to come.” Senate President Stephen Morris, R-Hugoton, has appointed a special committee to work on KPERS, and assigned himself as chairman.
State pension systems across the nation are in similar situations, but a recent study by the Pew Center for the States said that KPERS was the second-worst under-funded in the nation.
During the 1990s, Deck said, KPERS routinely benefited from double-digit percentage gains through investments. He said that “masked” the problem of under-funding from the state.
Some states are considering adopting 401 (k)-style plans for new employees. Deck said he thought Kansas legislators would also study that.